Bitcoin's nearly-free transactions make it so that there is no exchanger too small. Instead of there being formal currency exchange booths, there is an exchanger that your coworker is related to, for instance. So you trade with the coworker (for a small fee) and the coworker does the trade with the relative that does perform exchange.

You're essentially describing hawala. Where is the incentive to add the extra layer of using Bitcoins at both ends though? Why add extra, potentially traceable steps to the process - the reason it works is because it doesn't need to intersect with the conventional banking system and funds don't need to leave the country of origin. You can only compete with WU and hawala if you can offer the same ease of access - a dealer in virtually every neighbourhood. The families back home to whom people want to send funds are often nowhere near urban centres - you need to partner with existing businesses in the neighbourhood and have them adopt funds transmission as a side-line as a stand-alone money transmission service isn't going to be profitable in many regions.

The difference is that you can settle immediately and thousands or millions of dollars of value debts don't pile up resulting in ostracism or murder when someone defaults.

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The difference is that in the remittance destination country, the roughh equivalent of a "hawalder" can work independently and doesn't need to have any trust relationship with the hawalder receiving funds on the other end.

You can only compete with WU and hawala if you can offer the same ease of access - a dealer in virtually every neighbourhood.

I'm wondering how long it will take current hawalders to figure out they can use bitcoin to do deals on their own. Bitcoins don't yet have much value for the recipient of a remittance transfer but in bulk they do have value to an enterprising hawalder, such as being useful to pay for purchases made abroad or to sell to a local investor perhaps.

a stand-alone money transmission service isn't going to be profitable in many regions.

That's the difference between Bitcoin and a Western Union. A WU agent location needs lots of volume to pay for the overhead. An individual who provides a method to cash out your bitcoins can be profitable on every trade. It doesn't need to be a full time operation or need to start out as a part time gig even. There no doubt are individuals with a little extra time and money that will do this exchange "as a favor" to be able to earn the 5% or 10% that doing so will bring. And then word gets out and in the following month there are two recipients who need this favor. And then it is four, then eight, and pretty soon this individual now has this sideline business doing cash-out service.

Also, then consider how basic business sense starts to take over. If I am offering a Bitcoin cash-out service to you, and you turn around and use that cash to pay for your mobile phone refill, then why don't I just start selling to yo mobile phone refills for bitcoins, and earn the profit from that sale as well?

How does western union do it? How do they buy local currency in vietnam when the input is dollars in the us? It is this transfer of fiat from the us to vietnam which is the interesting mechanism which needs to be copied.

Since both are traded on international Forex markets, WU can just use those. A Bitcoin exchange will have to either find buyers of Bitcoin locally or convert to USD and convert that to local currency on the international Forex markets.

Can't you sell the bitcoins to the Vietnamese directly?If it's anything like where I live, it's next to impossible to get hold of bitcoins unless one has a US bankaccount.In most countries the problem is getting hold of bitcoins in the first place, so you should be able to sell them quite profitably.

Yes I probably could to rich and techinical people. However, right now there is a need and that is to send money to family overseas. Western union and moneygram charge 10-20%. If you send $100 they will take $20. That $20 could have been a months supply of food for a person in Viet Nam. So I would think this opportunity is huge because people need to eat.

I cant believe you starting the idea based on a completely wrong observation

Who would send money to China and VietNam through Western Union. The communities have already developed a money transferring network among themselves.

Dont believe me, ask any Vietnamese/Chinese friend.

What you're promoting is just basically bank wiring from Mtgox/CryptoX. Why would you need bitcoins?